Has Paychex, Inc. (PAYX) Become the Perfect Stock?

Paychex, Inc. (NASDAQ:PAYX) is one of the leading providers of HR and payroll services to employers, focusing on small and mid-sized businesses for its primary client base. You might think that given the weak economic environment and tepid job growth in recent year, Paychex would have struggled, especially in comparison to rival Automatic Data Processing (NASDAQ:ADP) and its focus on healthier large employers. But throughout the years, the company has countered slow organic growth by making strategic acquisitions to build up its payroll, retirement benefits, and other HR segments. It also makes the most of the revenue it gets, with industry-leading profit margins that dwarf ADP’s.

But the HR industry has made major advances in the recent past, with the rise of LinkedIn Corp (NYSE:LNKD) changing the ground rules for the business. So far, LinkedIn has stayed on the staffing and recruiting side of the business, but if it attracts enough premium clients among employers, it’ll be a natural fit for LinkedIn to expand its services and go after Paychex’s core payroll business.

Paychex, Inc. (NASDAQ:PAYX) could get a boost from new tax laws, as the resolution to the fiscal cliff crisis resulted in changes to withholding for taxes, certain retirement benefits, and other payroll-handling issues. The company will have to fend off Intuit Inc. (NASDAQ:INTU) , however, which will inevitably use its reputation for tax expertise to try to boost its position in the payroll-handling industry.

For Paychex, Inc. (NASDAQ:PAYX) to improve, it needs to find the growth that should naturally result from better employment figures. The recovery has been slow, but if job creation speeds up, Paychex could get a lot closer to perfection.

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The article Has Paychex Become the Perfect Stock? originally appeared on Fool.com.

Fool contributor Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Automatic Data Processing, Intuit, LinkedIn, and Paychex and owns shares of Intuit and LinkedIn.

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